Rules of engagement

I cannot think of too many rules of management that hold true in all conditions, but some are better than others.

Many years ago I undertook an executive program at Colombia University. One of the professors involved was Professor John Whitney.

I was having dinner with him one evening when I thought I would run by him some principles or, if you like, rules, that I had developed to assist me in management, and so I said: “John, I have four rules of management” to which he replied “well I only have two”.

I thought that I had better listen to his two rather than share my four with him. He said that his first rule was that the customer was always right and his second rule was that if you can’t remember it go back to rule number one.

While there is substantial validity in this rule, I am not sure that it is a universal truth. However, I never had the opportunity of sharing with him my rules, which are quite simple.

1. You must communicate.
2. You can do no more than your resources permit.
3. 2 + 2 = 4 (This is a mathematical truism and is an insuperable obstacle to the delusional theory that on occasions 2 + 2 = 5).
4. If you have communicated properly and worked within your resources and done your sums and it isn’t working; don’t panic.

You might break one of the first three rules and get away with it for a while, but if you break the three, it is inevitable that there will be a day of reckoning and depending upon what is at stake, that day could be quite catastrophic.

Catastrophes might be attributed to bad luck but almost without exception (and so far I haven’t come across an exception) they flow directly from the failure to observe these three rules.

One recurrent phenomenon that I come across is the business that wants to grow fast but frequently hits a head wind. Management finds that the quicker they grow, a number of factors start affecting upon the business.

The first is that it costs money to grow and often money spent on growth is not repaid in revenue for some time down the track, with the result that the bank becomes a little more anxious. The more cautious do their sums before they embark on expansion and keep the bank involved as their partner.

However, there are some tricky mathematics that relate to funding growth and often even the most cautious miscalculates their financial need. There is a great book by a person with the unlikely name of Professor Robert Higgins, professor of financial analysis at Stanford, which can be obtained from Amazon called “Analysis for Financial Management.”

Another factor in rapid growth is providing the infrastructure. I have never quite determined where it is, but when it happens you know. There is a point in growth where the company assumes a completely different size and shape.

Up until then, management by eye ball control works fine, but at this critical point, things start getting more complicated and management finds itself faced with putting out fires. The premises are inadequate, the distribution outlet was fine once but with the number and distribution of new customers, the logistics involved in servicing them become more complicated.

New skills are needed such as IT and network management, web maintenance, financial and inventory controls etc. The risk is that if a business grows too fast, there is a sudden need to address a lot of these issues all at once and that adds again not only to the cost but to the complexity.

I cannot think of too many rules of management that hold true in all conditions but I have yet to come across an exception to the rule that you can’t do more than your resources permit.

There is a bit more to this issue and so I will come back to it next week.

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